Today Mr. Johnson is no longer with Microsoft Corp. (MSFT). He's CEO of Juniper Networks, Inc. (JNPR). But his $6.2B USD gamble into display advertising firm aQuantive is back in the headlines after Microsoft took a $6.2B USD writeoff on the struggling pet project.

Microsoft spent the $6.2B USD to acquire aQuantive in 2007, a bold bid that greatly expanded its small stable of search-tied online ad-offerings. Since the acquisition, though, the road has been nothing but rocky.

To be fair, Microsoft has grown Bing from an 8.4 percent market share to a 15.4 percent share, according to ComScore. But the problem is that gain has been less of a grab and more of a resource transfer, as it came at the expense of Yahoo! Inc. (YHOO), the floundering search veteran who Microsoft paired with back in 2009.

The problem is that Microsoft needs to reach a "tipping point" in order to lure large advertising clients to its service. Analysts have speculated that the magic number is around 25 to 30 percent of the market. But that would likely require Microsoft to scoop double digits of market share away from Google Inc. (GOOG) which has hardly budged from its 60+ percent dominant position.

Bing is still struggling to reach its "tipping point" and achieve profitability.

Search in theory works something like a toll road. You pay a certain amount to route traffic to you -- expenses which range from the cost of server farms to the cost of advertising to build customer awareness of your brand name. You're repaid when people visit your search homepage and click on ads -- text or graphics -- that are displayed amongst the search results. Those clicks are compensated on a unit basis by advertising clients either directly (as in Microsoft's case) or through third parties.

The idea is to make your advertising dollars outweigh your "traffic acquisition" and hosting costs, generating a net profit. Google is the master of that game. Microsoft, is unfortunately on the wrong end of the equation.

Search is hurting Microsoft financially, burning away the windfall profits of its operating system division. Losses hit $1B USD per quarter last year, but have slowed to a slower bleed of $2B USD in the last 12 months.

The company glumly surmises, "While the aQuantive acquisition continues to provide tools for Microsoft's online advertising efforts, the acquisition did not accelerate growth to the degree anticipated."

Search is an expensive hobby, but Microsoft plans to stick with it for now, in hopes of reaching that ever elusive profit cloud. But one has to wonder how profitable Microsoft might be, if it just swallowed its pride and dumped the search baggage.

Contrary to what simple minded one cell brained Mick is posting here it looks like MS won't survive without Bing at all. Every major service provider these days like Google or Apple needs a huge internet service platform of their own, Amazon has one, Google, Apple is building iCloud, and MS can't afford to stay out of the game. The moment they dump Bing is the moment they start to lose their relevancy in the new globalized internet economy where internet is the juice that powers everything.

Besides, dumping Bing automatically makes Google absolute monopolist on the internet search/ads market and we all know what happens with such monopolies eventually, no matter how much of that "do no evil" propaganda Google is stuffing you with.

Another reason why MS won't dump Bing no matter what biased Micktroll states here is that Bing is slowly turning into a profitable division, Xbox style actually. Their losses keep constantly shrinking as MS keeps building out their global infrastructure. As Bing's scale and quality grows so is their profitability. I won't be surprised to see Bing going even (i.e. zero loss zero profit) in two years from now. Killing Bing right now when success is closer every year is something only an idiot would do and Ballmer is NOT an idiot no matter what Micktroll is selling you ;)

(hey Mick where's your balanced view on RIM huh? Thorsten Heins has posted a lengthy article about state of RIM in Globe and Mail today and you of course ignored it, anti-RIM bias much again eh? ;)

Stop lying, no one will believe you anyway because he did NOT say they are doing fine . He said they struggle but they have enough money in the bank and they also have growing subscriber base and growing sales of BB7 phones in international markets that will financially allow them to continue building BB 10 platform no matter what Mick and retro and other trolls are selling you all.

Growing sales in international markets? Third world countries perhaps? That's possible, Blackberries are ridiculously cheap here; handsets bundled with cheap plans, people who can't buy an iPhone or Android go with Blackberries :)

I was actually going to reply to your logical fallacies.I was going to point out that Bing is a search engine, and neither Apple nor Amazon has a search engine, so why you brought those up as evidence that Microsoft needs a search engine was beyond me, and any logical minded person that has the slightest semblance of the industry.

MS doesn't "need" a search engine but having one surely helps its business.

Notice how Google used its search engine's popularity to drive their other businesses and integrations such as Google+, news outlet, stocks search, blog search, Gmail, Youtube, Google Docs, Maps, etc.

If MS is unable to compete with Google in some of those areas, then they will die of a very slow death.

The internet is the present and future and not Windows. Google is dominating the internet. Apple is doing well because they are a hardware and software company. Amazon is doing well because it's an eCommerce store first and foremost.

It's not just Bing and the issue of search that confronts Microsoft. The next two years could be the most critical in it's entire history as the whole industry moves through an inflection point and into a entirely new conjunction of technologies. What is happening is the ground is shifting upon which Microsoft built it's empire of Windows. Microsoft and Windows is being disrupted.

For the first time since the dawn of the PC era Microsoft's operating system will no longer be the dominant and largest computer operating system, for the first time Microsoft will have to compete as just one system amongst many, as just one system with no advantages of incumbency, often as just one of the smaller players. This is new terrain for Microsoft and it will involve radically rethinking it's business strategy, as with it's move in to the PC hardware business with Surface, in a risky process with unforeseen outcomes as Microsoft is forced to disrupt it's own business.

How well and adeptly Microsoft manoeuvres in the next couple of years could determine it's fate, whether it remains a player or slips into a slow decline into irrelevancy. I wonder if Ballmer and co can pull it off?

This article lays out nicely one of the many the seismic shifts that are occurring.

Oh yeah, like MS was never fighting against heavy hitters, like MS never rose from a tiny company into a current global megacompany fighting off stiff competition every year. You are sounding so dumb at times Tony, your Mac zealotry pushes you way too far. You sound like MS was given Windows XP from the start, right in 1975 and of course MS was always a monopoly, even in 1975 eh? Microsoft was never competing and they were always a monopoly right? So it's like Netscape was killing itself and handing IE monopoly status just because Gates asked them politely right? Oh Tony, your zealotry and blindness to facts makes me so happy sometimes, I know that since you are a zealot then we should not take your or asymco's words as a final truth. You have your agenda, asymco has an agenda, and your words about MS being always a monopoly and unable to compete double prove all this.

Hence I'm not worried about MS at all, because I know the history and I was there when MS was tiny, young and growing fast. I don't believe MS lost their early mojo, their own bold experiments with their own hardware and their willingness to screw their OEMs quick _double_ prove that.

I just visited an MS retail store, looked at their selection of laptops and other stuff, played with some of them in the store, checked out cool new Samsung 15" Ultrabook, something Apple will never be able to release for such a great price. Man, MS is onto something, they expand their retail stores pretty quick these days, and you Mac zealots cast a blind eye to that. You know what? I love the fact that asymco has NO idea this is happening. I will enjoy the sight of him caught pants down, heheee. You just wait.

quote: If MS is unable to compete with Google in some of those areas, then they will die of a very slow death.

By that logic Google will die a very slow death if they don't make an OS that can compete with Windows.

Or Toyota will die slowly if they cannot compete with Starbucks Coffee.

Your logic is impossible to agree with. Microsoft will never die a slow death because of Bing or any online service deficiency.

10 years ago the Internet was still the future, and Microsoft is still here today. Please, think about it. The Internet is reaching a plateau in capabilities, the only improvements to come will be in wireless access, speed, latency times, and ancillary benefits. We can already do practically EVERYTHING there is to be done online easily and cheaply (usually free). And Microsoft doesn't appear to be going anywhere just yet.

quote: By that logic Google will die a very slow death if they don't make an OS that can compete with Windows.

Or Toyota will die slowly if they cannot compete with Starbucks Coffee.

Your logic is impossible to agree with. Microsoft will never die a slow death because of Bing or any online service deficiency.

10 years ago the Internet was still the future, and Microsoft is still here today. Please, think about it. The Internet is reaching a plateau in capabilities, the only improvements to come will be in wireless access, speed, latency times, and ancillary benefits. We can already do practically EVERYTHING there is to be done online easily and cheaply (usually free). And Microsoft doesn't appear to be going anywhere just yet.

I sort of agree with you (gasp!). The idea the web and the browser could replace an operating system proved wildly premature and may never happen. However something else happened, which is the beginning of the replacement of the web/browser by the app. Hundreds of millions of people, soon over a billion, are using operating systems where they regularly access the internet, information and communicate not via the browser or email but via inexpensive, powerful but specialised apps.

The rise of the app poses problems for Microsoft because it will strongly push down prices and margins on software and Microsoft is a software company which has almost zero presence in the new app markets. Note the large price drop on Windows 8, the beginning of the serious erosion of it's software margins.

But the rise of the app also causes problems for Google. Mobile ads are a tiny market per user compared to desktop/browser ads. Mobile advertising will probably never be even remotely as lucrative as the desktop. And the rise of the app bypasses Google's ability to track and record user behaviour and thus undermines a key part of the product it offers it's customer (i.e. those who buy advertising).

Horace Dediu at Asymco estimated last year ( http://www.asymco.com/2011/06/30/how-much-is-an-io... ) that each iOS customer is worth $150 per year to Apple, every year. That means when iOS hits a billion users in about a year Apple will be making $150 billion per year on its service and content stack on top of the money it makes selling it's devices and hardware . That's the power and the value of the new App economy. And unlike both Microsoft and Google the rise of the app economy and the app internet poses no threats to Apple's core product, it's hardware, in fact it enhances it's value.

You make some good points. I don't necessarily agree that Microsoft will kick the bucket without Bing. After all, most companies don't have a search engine and do just fine. However, I think we agree that killing off Bing, especially given its growth, would very negatively impact the company. Microsoft can't expect to maintain their current status going forward without delivering a compelling internet service platform. Bing provides a nice tie in to such services.

Unfortunately, your overzealous ripping on Mick (deserved or not) causes many to ignore these points, downrate your post to oblivion, and thereby prevent further reading by many visitors. I propose that you present the flaws in the article as you see them, back them up with facts and logical reasoning, and let others decide based on your arguments how many brain cells Mick (or anyone else) has.